New Delhi, Dec 16 The Reserve Bank of India’s decision to keep key rates unchanged will help improve business sentiments and regain economic growth momentum, Finance Minister Pranab Mukherjee said Friday.
“I am hopeful today’s announcement will help in regaining our growth momentum with improved macro economic parameters in the remaining period of fiscal 2011-12,” Mukherjee told reporters here while reacting on the RBI’s mid-quarter review of monetary policy in which it kept key policy rates unchanged.
Welcoming the central bank’s move, Mukherjee said the RBI has chosen to address the concerns on slowing growth.
“The RBI has changed its policy stand from the monetary tightening. There is no change in any policy variables and that includes the repo rate… Governor has chosen to reflect his concern on growth which has altered in the past few months,” the finance minister said.
In its mid-quarter review of the monetary policy, the central bank kept key rates unchanged Friday after 13 successive hikes since early 2010.
The review came against the backdrop of India’s annual rate of inflation falling to 9.1 percent in November, while the food inflation fell to 4.35 percent for the week ended Dec 3.
But factory output declined 5.1 percent in October, while the gross domestic product saw a mere 6.9 percent growth during the second quarter of this fiscal, which was the lowest in over two years.
The Indian economy grew by 8.5 percent in 2010-11 and the government had set a target of around 9 percent growth for the current financial year.
The finance minister said the recent moderation in inflation and growth had necessitated change in monetary tightening stance.
“There has been an appreciable decline in food inflation in the month of November but inflation in manufactured products is still high,” Mukherjee said.
“The need to improve the business sentiments and recover the growth momentum in the remaining months of the current fiscal necessitated a review of the current monetary policy stance,” he said.
The Reserve Bank said it maintained its projection for annual inflation at 7 percent for end-March, while reserving its forecast on growth for the third quarter review, which is expected in January.